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Money erosion in commissioning and operation of Kudankulam plant

Implementation of the first two units of the Kudankulam Nuclear Power Project in Tamil Nadu, by Nuclear Power Corporation of India (NPCIL) had several deficiencies, says the office of the Union comptroller and auditor-general (CAG).

That included avoidable payment of interest on borrowings, non-transparency in availing of loans to the tune of Rs 1,000 crore from HDFC, lapses in rate fixation and undue benefits to foreign collaborating partners. All resulting in losses of several thousands of crores.

Commercial operation of Unit I was done six months before getting a licnece for regular operation. Schedule dates for completion of the project were repeatedly postponed for both units, due to delayed completion of different activities, many were attributable to Atomstroyexport (ASE), a Russian company. However, there was no revision of schedule in repayment of the Russian credit taken, resulting in start of repayment of Russian credit before revenue generation, causing additional interest burden on NPCIL of Rs 449 crore.

The company had to resort to external borrowing at a higher interest rate for allied reasons. Additional interest cost was Rs 76 crore.

A term loan of Rs 1,000 crore was taken from HDFC Bank in violation of Central Vigilance Commission guidelines on tendering. While fixing the rate for power, it did not consider two components, interest on foreign debt and interest on domestic borrowings, though these were incurred and paid. This resulted in short realisation of revenue by Rs 90.6 crore during pre-commercialisation.

Unit I was shut down from June 2015 to end-January 2016, for 222 days as against the planned 60 days. This was due to a decision by NPCIL to shut the plant and execute refuelling work on its own, without evaluating its technical competency.

The extended shutdown resulted in revenue loss of Rs 948 crore.

Units I and II started commercial operation after a delay of 86 months and 101 months, respectively. The delays were primarily due to shifting of work from the Russian part to the Indian one, causing a string of delays and losses. NPCIL did not initiate any claim for recovery of additional expenses of Rs 264.8 crore, caused due to delayed completion by ASE.

As against the original value of Rs 131.7 crore, NPCIL incurred Rs 231 crore on supply of equipment in a rearranged contract. It neither assessed the extra payment and loss due to non-supply or defective supply by ASE or initiate any action for recovery. It did not raise or pursue claims for liquidated damages worth Rs 463 crore for ASE, though during the same time it was borrowing funds and paying interest to discharge debt obligations.

has also detailed an extra and culpable spending of Rs 707 crore on erection and commissioning of steam supply and turbo generators. And, in not ensuring reasonability of rates of third party supplies worth Rs 900 crore, made by ASE, for the plant. An amount of Rs 92 crore towards 10 per cent interest-free advance was paid by NPCIL to ASE for third country supplies, without ascertaining the existence of similar provisions in the sub-contracts entered by ASE with third country suppliers, it said.

has recommended in all cases of rescheduling of commissioning dates, the repayment schedule for Russian credit also be revised accordingly. It has given other recommendations to monitor insurance claims and on future planned shutdowns. And, to take timely action for recovery/adjustment for non/defective supply of material.

Source: Business Standard –


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